Correlation Between Velocity Financial and Federal Home

Can any of the company-specific risk be diversified away by investing in both Velocity Financial and Federal Home at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Velocity Financial and Federal Home into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Velocity Financial Llc and Federal Home Loan, you can compare the effects of market volatilities on Velocity Financial and Federal Home and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Velocity Financial with a short position of Federal Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Velocity Financial and Federal Home.

Diversification Opportunities for Velocity Financial and Federal Home

-0.89

Correlation Coefficient

Velocity Financial  Federal Home

Pay attention - limited upside

The 3 months correlation between Velocity and Federal is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Velocity Financial Llc and Federal Home Loan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Home Loan and Velocity Financial is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Velocity Financial Llc are associated (or correlated) with Federal Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Home Loan has no effect on the direction of Velocity Financial i.e., Velocity Financial and Federal Home go up and down completely randomly.

Pair Corralation between Velocity Financial and Federal Home

Considering the 90-day investment horizon Velocity Financial Llc is expected to under-perform the Federal Home. But the stock apears to be less risky and, when comparing its historical volatility, Velocity Financial Llc is 8.77 times less risky than Federal Home. The stock trades about -0.14 of its potential returns per unit of risk. The Federal Home Loan is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  252.00  in Federal Home Loan on December 2, 2024 and sell it today you would earn a total of  297.00  from holding Federal Home Loan or generate 117.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Velocity Financial Llc  vs.  Federal Home Loan

Velocity Financial Llc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Velocity Financial Llc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Federal Home Loan

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Federal Home Loan are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Federal Home exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Velocity Financial and Federal Home

The main advantage of trading using opposite Velocity Financial and Federal Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Velocity Financial position performs unexpectedly, Federal Home can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Federal Home will offset losses from the drop in Federal Home's long position.

The idea behind Velocity Financial Llc and Federal Home Loan pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.